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CNBC
11-06-2025
- Business
- CNBC
The pros and cons of a $1,000 baby bonus in 'Trump Accounts,' according to experts
President Donald Trump's proposal for a new savings account for children with a one-time deposit of $1,000 from the federal government just got an important stamp of approval. At the "Invest America" roundtable at the White House this week, several top CEOs, including Michael Dell and Goldman Sachs chief David Solomon, expressed support for "Trump Accounts," which are part of the landmark Republican-backed "big beautiful bill" moving through Congress. The executives committed to contributing to the accounts of their employees' children, and, in Dell's case, matching the government's seed money "dollar for dollar." Still, policy experts and financial advisors question whether the provision is the most effective way to save on behalf of your child. Under the House measure, Trump Accounts — previously known as "Money Accounts for Growth and Advancement" or "MAGA Accounts" — can later be used for education expenses or credentials, the down payment on a first home or as capital to start a small business. Earnings grow tax-deferred, and qualified withdrawals are taxed at the long-term capital-gains rate. More from Personal Finance:Trump's 'big beautiful' bill could curb low-income tax creditWhat a 'revenge tax' in Trump's spending bill means for investorsWhat's happening with unemployed Americans — in 5 charts Trump's massive tax and spending bill still faces a battle in the Senate, but if it passes as drafted, parents and others will be able to contribute up to $5,000 a year to a child's Trump Account. The balance would be invested in a diversified fund that tracks a U.S.-stock index. Sen. Ted Cruz, R-Texas, who spearheaded the effort, told CNBC in May that the accounts give children "the ability to accumulate wealth, which is transformational." "This will afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning," the White House also said in a statement Monday. Some experts say the biggest benefit of Trump Accounts is the seed money for all children born between Jan. 1, 2025, and Jan. 1, 2029, funded by the Department of the Treasury. There are no income requirements. To be eligible, the child must be a U.S. citizen and both parents must have Social Security numbers. Although some states, including Connecticut and Colorado, already offer a type of "baby bonds" program for parents, Trump Accounts — along with a bigger child tax credit proposed in the budget bill and potential employer-sponsored matching funds — "could certainly help a lot of families at a lot of different income levels," Sam Taube, NerdWallet's lead investing writer, recently told CNBC. Invested in a broad equity index fund for 20 years, a $1,000 government grant for newborns could grow to an average $8,000, according to a March report from the Milken Institute. "If the policy also permitted a tax-deductible match by employers of the children's parents, such initial matches would double an account's value," researchers wrote. Depositing $1,000 into an account "is a good idea, but with a critically important caveat," said Mark Higgins, senior vice president at Index Fund Advisors and author of "Investing in U.S. Financial History: Understanding the Past to Forecast the Future." With Trump Accounts, "the costs are the key," he said: "If it keeps adding to the deficit, it is not sustainable." (By some accounts, the program could cost more than $3 billion a year.) "The biggest challenge for this country right now is that we have lived beyond our means," he said. "Over the last 230 years, Congress has passed countless programs like this, which provide short-term benefits that are almost invariably dwarfed by the long-term costs." Universal savings accounts, which allow for more flexibility, would be a better proposal than the House provision, said Adam Michel, director of tax policy studies at the Cato Institute, a public policy think tank. Universal savings accounts have had bipartisan support going back as far as the Clinton administration, and without the initial deposit, would come a much lower cost. They have also been successfully implemented in other countries, including Canada and the United Kingdom, according to the Tax Foundation. Further, Trump Accounts are "overly restricted and needlessly complex," Michel said. "A simpler system is a better way to get people to save." With a universal savings account, individuals could contribute up to $10,000 of after-tax income a year and withdraw the funds tax-free at any time for any purpose, according to Michel. "It's the flexibility that entices people," he said. "Maybe you want to use that money to start or expand a business or buy a house or an investment property — let people choose what's best for their lives." Another alternative is a tapping 529 college savings plan, which nearly every state offers. These 529 plans have much higher contribution limits, earnings grow on a tax-advantaged basis, and when a child withdraws the money, it is tax-free if the funds are used for qualified education expenses. This year, individuals can gift up to $19,000 to a 529, or up to $38,000 if you're married and file taxes jointly, per child without those contributions counting toward your lifetime gift tax exemption. Although there are more limitations on what 529 funds can be applied to compared to Trump Accounts, restrictions have loosened in recent years to include continuing education classes, apprenticeship programs and student loan payments. "For most parents, like myself with teens, the 529 college savings plan is superior if you're focused on paying for higher education because of the federal tax-free growth," Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, recently told CNBC. "Also, now, the 529 is becoming more flexible with its' ability to have unused funds rolled into a Roth IRA in the future for retirement," said Sun, a member of CNBC's Financial Advisor Council. As of 2024, families can roll over unused 529 funds to the account beneficiary's Roth individual retirement account, without triggering income taxes or penalties, so long as they meet certain requirements.
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Business Standard
10-06-2025
- Business
- Business Standard
Trump pitches 'Trump Accounts' to CEOs to fund newborn investment plan
US President Donald Trump hosted a roundtable with a group of leading CEOs on Monday at the White House to promote his flagship investment initiative for American newborns. The scheme, titled the 'Trump Account', proposes a $1,000 government-backed deposit for every US-born child and is part of Trump's sweeping legislative proposal, the 'One Big Beautiful Bill'. Although the bill has cleared the House of Commons, it faces significant hurdles in the Senate, particularly after high-profile criticism from Tesla owner Elon Musk, who until recently was a key advisor to Trump. CEOs voice cautious support The roundtable was attended by more than half a dozen prominent corporate leaders, including Michael Dell, founder and CEO of Dell Technologies; Dara Khosrowshahi, CEO of Uber; David Solomon, chairman and CEO of Goldman Sachs; and Vladimir Tenev, co-founder and CEO of Robinhood. While none of the attendees committed specific funding amounts, Dell announced that his company would match the government's $1,000 contribution for children of its employees. Describing the move as 'a simple yet powerful way to transform lives,' Dell told Business Insider, 'The creation of investment accounts for every child will compound into substantial nest eggs providing support for education, home ownership, and starting families.' Goldman Sachs CEO David Solomon echoed the sentiment, saying, 'Our economy's future vitality is dependent on young people understanding the power of investing for the long term.' Uber's Dara Khosrowshahi added that the initiative could act as a launchpad for future generations. 'It puts the unstoppable engine of compounding to work for our kids, building a future for them from day one.' What is the 'Trump Account'? Formerly referred to as 'Money Accounts for Growth and Advancement' or 'MAGA Accounts', the 'Trump Account' is central to the broader 'One Big Beautiful Bill' spending plan. It proposes a $1,000 deposit for every child born in the US between January 1, 2025 and December 31, 2028. Parents, religious institutions, and private donors will be allowed to contribute up to $5,000 annually to these accounts. Half of the funds can be withdrawn when the child turns 18, with full access available at age 30. Withdrawals are restricted to specific expenditures, such as education, down payments on homes, or small business investments. Unapproved uses would trigger financial penalties. Calling it 'a pro-family initiative', Trump said the programme is designed to 'help millions of Americans harness the strength of our economy to lift up the next generation'. Political and legislative hurdles Despite the enthusiastic reception from some business leaders, the bill's progress has been anything but smooth. Its passage in the House was marred by partisan disagreement, and the proposal now faces tough scrutiny in the Senate. Elon Musk's public disapproval of the initiative as 'economic fantasy' has also added pressure to the administration's efforts to gain wider industry and political support. Nonetheless, the Trump administration is betting on private sector buy-in to bolster the credibility and feasibility of the plan, portraying the investment accounts as a tool for financial literacy and long-term economic empowerment.
UPI
10-06-2025
- Business
- UPI
Trump, CEOs unveil 'Invest America' savings accounts for newborns
June 9 (UPI) -- President Donald Trump on Monday unveiled plans for the U.S. government and companies to collectively invest money in savings accounts for employees' children as part of the $1.45 trillion discretionary spending bill. The "Invest America" roundtable in the State Dining Room at White House included CEOs from several companies, as well as U.S. House Speaker Mike Johnson and other House members. The budget bill passed narrowly by the U.S. House last month and has moved to the Senate. Republicans want the bill signed by Trump before the Fourth of July. The federal savings program has been referred to "Trump accounts," "Money Accounts for Growth and Advancement" and "MAGA Accounts." The pilot program would seed index fund accounts with $1,000 in Treasury Department funds for U.S. citizens born between Jan. 1, 2025, and Dec. 31, 2028. Companies, employees, other family members and friends also can make post-tax contributions up to $5,000 annually. The CEOs participating were Michael Dell of Dell Technologies, Brad Gerstner of Altimeter Capital, Rene Haas of Arm Holdings, Parker Harris of Slack and Salesforce, William McDermott of ServiceNow, Dara Khosrowshahi of Uber, David Solomon of Goldman Sachs, Vladimir Tenev of Robinhood. "They really are the greatest business minds we have today," Trump said. "These men and women lead large, successful companies. And they are committed to contributing millions of dollars to the Trump account. It's really to be something incredible for children and their employees." He singled out Dell, who months ago presented the idea to the president. He started his company from a garage in 1984 in Austin, Texas, and it has grown into a company worth $78 billion. Dell said his company will match dollar for dollar the $1,000 from the government and his foundation will make a "significant gift." The computer CEO called it a "simple yet powerful way to transform lives. ... This is an investment in our people, their families, our communities and America's future." Trump said: "Extensive research shows children with savings accounts are more likely to graduate high school and college, buy a home, start a business and are less likely to be incarcerated." The accounts' performance will be based on a U.S. stock market's index fund. The accounts would be controlled by children's guardians until they turn 18. The account beneficiary will be able to withdraw up to 50% of their balance beginning at age 18 with full access at 25 for qualified purposes and no restrictions at 30. A $1,000 investment in the Standard and Poor 500 exchange-traded fund trust made 18 years ago would be worth $5,590 today, according to FactSet data. That same investment 31 years ago would be worth $22,770. The pilot program is similar to other savings account options, including 529 college savings plans, which also have contribution limits. Some already offer a type of "baby bonds" program for parents. They are also like 401 (k) accounts offered by businesses with tax savings and the power of compound interest over several years. "Trump accounts take it from the same principle and they apply it from the very beginning of Americans' lives," Johnson said. "It is a pretty simple concept." The savings account proposal is one small aspect of the budget legislation. "The passage of the One Big Beautiful Bill will literally change the lives of working, middle class families across America by delivering the largest tax cuts in history, increasing the child tax credit, and by creating this incredible new 'Trump Account' program, which will put the lives of young Americans on the right financial path!" White House press secretary Karoline Leavitt told CNBC in a statement. The legislation includes an extension of expiring tax cuts from 2015 and money for immigration. Some Republicans, as well as Elon Musk, who ran the Department of Government Efficiency, don't want to add the debt of $26.2 trillion. The Congressional Budget Office projects it will increase federal deficits by about $2.4 trillion over a decade. "I didn't go out to craft a piece of legislation to please the richest man in the world," Johnson, R-La., said in response to Musk's criticisms in an interview with ABC News on Sunday. "What we're trying to do is help hardworking families who are trying to make ends meet."
CNBC
09-06-2025
- Business
- CNBC
'Trump accounts': CEOs to unveil investments for newborns at White House
The CEOs of Uber, Dell, Goldman Sachs and more are expected to announce Monday that they will collectively invest billions of dollars into so-called Trump accounts for the children of their employees, a White House spokesperson confirmed to CNBC. The executive are slated to make the commitments during President Donald Trump's roundtable event touting the eponymous pilot program, which would deposit $1,000 from the government in investment accounts for newborn Americans. NBC News first reported the details of the event. More than half a dozen corporate leaders are set to appear for the "Invest America" roundtable at the White House at 2 p.m. ET, the White House official told CNBC. They include: The provision to create the accounts passed the House last month as part of the massive budget bill that the president is pushing Republicans to send to his desk before the Fourth of July. The bill is pending before the Senate, where it faces strong pushback from some fiscally conservative Republicans who are demanding major changes. The program — previously referred to as "Money Accounts for Growth and Advancement" or "MAGA Accounts" — would seed index fund accounts with $1,000 in government funds for U.S. citizens born between Jan. 1, 2025, and Dec. 31, 2028. The tax-deferred accounts, which track the overall U.S. stock market, allow additional contributions of up to $5,000 per year. The seed money will be funded by the Treasury Department and controlled by the child's guardians. Funds can be distributed once the beneficiary turns 18. The pilot program is similar to other savings account options that already exist, including 529 college savings plans, which have higher contribution limits. Some financial advisors say that the Trump accounts may not offer the best investment incentives. "The passage of the One Big Beautiful Bill will literally change the lives of working, middle class families across America by delivering the largest tax cuts in history, increasing the child tax credit, and by creating this incredible new 'Trump Account' program, which will put the lives of young Americans on the right financial path!" White House press secretary Karoline Leavitt told CNBC in a statement. —
The Hill
28-05-2025
- Business
- The Hill
What to know about the $1,000-per-child ‘Trump accounts'
(NEXSTAR) – Among the 1,000-plus pages of President Trump's tax bill is a proposal that would put federal money into accounts for babies born during his second term. Initially dubbed 'Money Accounts for Growth and Advancement' (MAGA), the savings proposal was recently renamed 'Trump account.' Sen. Ted Cruz (R-TX), who is credited with coming up with the idea, calls the $1,000 investments 'transformative' for future generations. 'There are many Americans who don't own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake,' Cruz told Semafor. The idea itself, to give babies a financial head start when it comes to education, homeownership and financial success, is not new, however. A similar plan has been implemented in Connecticut and another proposed by Sen. Cory Booker (D-NJ). Under Trump's 'big beautiful' bill, qualifying babies born between Jan. 1, 2025 and Jan. 1, 2029 would receive $1,000 in a Trump account opened by their parents or the Treasury. To be eligible, the newborns would have to be U.S. citizens and have a Social Security number. A parent must also provide a Social Security number to show they are eligible to work, according to the bill. 'If the Secretary of Treasury determines that an eligible individual does not have an accountopened for them by the first tax return where the child is claimed as a qualifying child, theSecretary shall establish an account on the child's behalf, taking into account, to the extentpossible, the parents preferred custodian and investment fund,' the bill reads. 'Parents will be provided the option to opt out of the account.' Families would have the option to add up to $5,000 a year, with the account holder unable to take distributions before age 18. Contributions from tax-exempt entities, such as private-foundations, aren't subject to the $5,000 cap. At the age of 18, additional investments would be capped, but the named account holder would be able to access up to 50% of the money to pay for higher education, training and first-time home purchases. At age 30, account holders would have access to the full balance for any purpose. The money would be invested in a U.S. equity index fund and taxed as capital gains if spent on qualified expenses, according to retirement publication Plan Adviser. Withdrawal of the money for non-qualified purchases would be penalized and taxed as ordinary income. Michael Piwowar and Robert Shapiro, of the Milken Institute, published a paper analyzing the growth prospects of such an account and found that, on average, the $1,000 investment would grow to $8,000 after 20 years, $69,000 after 40 years and $574,000 after 60 years. A number of experts reacted favorably to the creation of the accounts, but questioned the structure. 'The MAGA accounts proposal is an encouraging step—but it misses a critical piece,' Zach Buchwald, CEO of Russell Investments, told Plan Adviser in a statement earlier this month. 'If we want true financial security, we need long-term solutions that include retirement. Let's give every young American a chance to build real wealth—not just a starter fund.' Others asked why families would put money that has already been taxed into an account that doesn't allow you to take it out tax-free, when there are options such as the 529 college savings plan, or Roth IRA that would allow them to do just that. 'The giving kids money aspect is generally good,' Zach Teutsch, a managing partner at Values Added Financial, told Yahoo Finance, but called the account structure 'ill-considered' since families who choose to fund a Trump account over a tax-advantaged 529 plan would seemingly be 'shockingly sure' their child wouldn't be going to college. Meantime, Trump accounts will only become a reality if the administration's 'big, beautiful bill' makes it through the Senate, which could involve a rewriting process in order for the package to garner 51 votes. Should the bill pass without changes to Trump accounts, financial writer Jim Wang has this advice: 'You might as well take the free $1,000 that comes with automatic enrollment of a Trump Account but there's little reason to contribute more toward the account as the child ages. For education expenses, you're better off contributing into a 529 plan.' The Associated Press contributed to this report.
